Top secret: Did taxpayers get burned by Biscuit Run?

It seems like a simple question: How much will taxpayers pay to make Biscuit Run a Virginia park? Nearly a year after the

October 28 Hook cover image.

It seems like a simple question: How much will taxpayers pay to make Biscuit Run a Virginia park?

Nearly a year after the state's under-the-wire purchase of the 1,200-acre tract that had been slated to become Albemarle's biggest subdivision, the would-be developers and state officials appear to have successfully deflected inquiries about the value of tax credits that made the deal possible–- even as the Virginia state senator who penned the legislation establishing such tax credits now calls the secrecy "disturbing."

Meanwhile, tranquility-quashing plans remain to build 100 houses within the new park's perimeter.

Such revelations come as sources point out that the 850-acre Panorama Farms– a recreation-ready tract owned by a family eager to protect scenic terrain from development– was passed over for the honor of becoming Albemarle County's state park. Yet, it's the secrecy surrounding the Biscuit Run deal that has drawn fire from both sides of the political spectrum.

"It ought to be transparent," says State Senator Creigh Deeds, who served as patron of the land preservation tax credit system that became law a decade ago. "People ought to be able to judge for themselves whether its a good deal or not."

In a rare occurrence during politically polarized times, conservative radio show host and former Republican city councilor Rob Schilling agrees.

"It would be one thing if the developers just decided they weren't going to build it," says Schilling. "But for the state to get involved, and then start wheeling and dealing behind closed doors? I don't think that makes many people very happy."

***

A carved wood sign marks the entrance to Biscuit Run, which for decades was the site of a weekly get-together that brought artists, musicians and others to David and Elizabeth Breeden's home.PHOTO BY COURTENEY STUART

Located south of Charlottesville, sprawling Biscuit Run farm was purchased in 2005 for a record-shattering $46.2 million by a group of investors called themselves Forest Lodge LLC. Publicly headed by developer Hunter Craig and including Dave Matthews Band manager Coran Capshaw and at least one member of the Dave Matthews Band, the team justified the gasp-worthy price by the promise of a 3,100-home development inside the County's designated growth area. The plan promised–- in addition to giving the developers a return–- to give Albemarle $41 million in proffers (deal sweeteners such as money and roads) in addition to a 400-acre park and a permanently expanded tax base.

But as the real estate market tanked in the years following the purchase, Forest Lodge found itself shouldering an immense debt load and unable to move forward on the development. By November 2009, Bluefield, West Virginia-based First Community Bancshares alerted shareholders that the Biscuit Run loan was in “early stage delinquency” but assured that it was “adequately secured” by the large tract of undeveloped land.

Were wealthy developers about to get bailed out by high-level politicians?

On January 8, at an event held at Monticello that one attendee called a "victory lap," outgoing Governor Tim Kaine proudly announced that the state had purchased the land December 30 for a "bargain" price of $9.8 million. It was Albemarle's last recorded deed of the year, and Kaine declared a "debt of gratitude" to the Forest Lodge investors who appeared to be taking a tremendous financial hit by selling for nearly $37 million less than they'd paid just four years earlier. But did they?

State Senator Creigh Deeds, patron of Land Preservation Tax Credit legislation, now bemoans the secrecy that surrounds the awarding of such credits. "People ought to be able to judge for themselves whether its a good deal or not," he says.FILE PHOTO BY JEN FARIELLO

Just how big that hit really is largely depends on the value of tax credits worked into the deal. Figuring out the credits could be simple math–- the appraised value minus the sales price. But these numbers have been shrouded from the public, despite the fact that any tax credits are essentially a gift from other taxpayers.

Former councilor Schilling says he detested the timing of the deal, which came just weeks before Kaine, moving on to lead the Democratic National Committee, left office, and a single day before the end of tax year 2009. Nor does he like the secrecy around the appraisal that made the credits possible.

"It's weird that they won't say what it is," says Schilling, "Why not?"

Even though public money funded the deal, according to the Virginia Department of Taxation, such secrecy is a legal mandate based on the fact that any individual's tax records are confidential.

There appears to be nothing stopping the developers from voluntarily providing the numbers, but they have declined.

There are clues, however, for how high the Forest Lodge investors might have wanted the land to appraise.

Land use tax credits are awarded by the state based on the value of what's been donated–- a drop in value caused, for instance, by putting land into permanent easement or, say, the value of the donation for a state park. The state offers credits for 40 percent of the donation's value, and such credits can then be sold to wealthy individuals or corporations looking for a tax write-down at around 8o cents on the dollar.

By the Hook's calculations, the $9.8 million cash paid by the state began chipping away at the $34.3 million dollar loan, but the investors would still owe approximately $24.5 million. To get sufficient credits to cover the loan, the land would need to appraise for upwards of $61 million. To gain enough credits to recoup the entire investment, the appraisal would need to top $86 million.

That's nearly double the already hefty sum originally paid for the property in far better economic times. Could this land set near subdivisions and a mountain-top removal mine actually have appraised for that much– or even close?

Elizabeth Breeden, pictured here in a 2005 photo with her late husband, the artist David Breeden, says that while she will personally enjoy the state park, the deal is a loss for those fighting sprawl. "The citizens of Charlottesville and Albemarle, she says, "were not served well by this."FILE PHOTO BY LAUREN BROOKS

Hunter Craig has steadfastly refused to answer the Hook's numerous calls, and of a dozen or so Central Virginia appraisers qualified to value such large enterprises, most denied any knowledge of the appraisal. (Although one, Patricia Filer in Orange County, said, "I can't help you with that– I'm sorry," and then hung up.)

Robert Pettry, spokesperson for First Community Bancshares, also declines comment on any specific loan, including any appraisals that may have been used for the Biscuit Run loan (which, due to its mammoth size had been carved up among several banks). But in a public statement in January, First Community offered shareholders some good news about their portion of the loan, which came off the troubled-loan list thanks to the sale of the property and a "substitution of collateral."

Could that phrase indicate the presence of tax credits?

Pettry won't say. But according to a banking source, it sure sounds that way. The source, with experience on numerous multi-million-dollar deals, says it would be highly unusual for individuals behind an LLC to put up any property of their own as substitute collateral because the corporate structure of an LLC protects them from liability.

In First Community's case, it was owed $15.9 million at the time of the sale.

However, it's possible that no credits have yet been issued– that Forest Lodge investors are still waiting to find out just how much they've lost.

The January 8, 2010, event at Monticello announcing the state's purchase of Biscuit Run was a who's who of local developers, state politicians and even rock stars..FILE PHOTO

According to updated records from the Virginia Department of Taxation, in 2009 in Albemarle County, 8 tax credits were issued on 751 acres with a total value of $2,835, 720. So far in 2010 in the County, 18 credits were issued on a total of 2,690 acres for a total appraised value of $11,376,000.

Such relatively low numbers, both in acreage and appraised value, suggest the Biscuit Run deal has yet to move through the tax system. According to Joel Davison with the Taxation Department, the cap on Land Preservation Tax Credits for 2010 is $107 million. So far, the state has issued $75 million of those credits, and he says applications have risen above the cap.

But the banking source, speaking on condition of anonymity, also doubts that the bank would simply take yet-to-be issued tax credits without some sort of guarantee–- since the IRS can audit, and conceivably revoke, tax credits for up to three years.

One matter that First Community Bank's Pettry would comment on is a publicly available appraisal of Biscuit Run conducted on behalf of the Virginia Department of Transportation. That appraisal pegged the property value at just $12 million– a figure that would have provided only about $3.8 million in tax credits. That would have left the investors and the bank deeply wounded.

"We didn't know about that, other than what you've told us," Pettry said earlier this year.

That 81-page VDOT-commissioned appraisal was conducted by Fauquier County-based appraiser James S. Damer and obtained by the Hook through a Freedom of Information Act request.

Biscuit Run, Damer writes, cost significantly more than similar-sized properties, including a site in fast-growing Chesterfield. He also notes that the cost of rezoning Biscuit Run– which took place between 2005 and 2007– created an additional $1.5 million in debt, and that the millions in proffers the County extracted after the initial purchase– $41 million, according to local growth watchdog Charlottesville Tomorrow– "appear to be excessive" when compared with similar developments.

Noting the grim state of the real estate market with a series of steeply declining graphs, Damer suggested that holding the property until market conditions improve was the only "financially feasible" option for Forest Lodge developers. (Perhaps showing how badly the developers bungled, he also noted that the property would have actually have held more of its value as a rural parcel without the extensive rezoning and proffers.)

Assigning a value of $12 million paved the way for VDOT to approve the use of nearly $5 million in federal money. Yet that money prompts critics of the deal to ask another question: Why was VDOT involved in the purchase of a park?

It turns out that VDOT has the power to disburse federal "enhancement funds," money targeted for projects fostering alternative transportation. In the Charlottesville area, enhancement money has assisted the new transit station at the east end of the Downtown Mall as well as the the Thomas Jefferson Parkway– a paved walking path that winds along Route 53 to Monticello. While some may have disagreed with the need for such projects, both are at least marginally understood as contributing to "transportation alternatives."

Biscuit Run wouldn't seem to qualify for enhancement funds. However, according to documents also obtained from VDOT, the purchase qualifies for a special category: "acquisition of scene easements and scenic or historic sites." In other words, the future park will serve as eye candy for those driving past. VDOT reimbursed the Department of Conservation– the state agency actually purchasing the property– with money from federal equity bonus funds, which was defended in a memo: "VDOT has confirmed that these funds can be used for eligible transportation enhancement activities."

But should they?

"It's a bit unusual that you would take any kind of transportation funds and use them to purchase a project the effect of which would be to extinguish more than $15 million of transportation improvements," notes Albemarle County supervisor Dennis Rooker. "It doesn't seem to be a real wise use of transportation funds."

While Rooker says he's not against having a state park in Albemarle, he points out that 400 of Biscuit Run's 1,200 acres were already slated to become parkland, and that 1,800 acres of parkland have been added since he was first elected to the Board of Supervisors in 2001. (Rooker also notes that the county spent $250,000 in staff time working on the proffers and the rezoning for Biscuit Run from 2005-2007.)

"The day it sold," says Rooker, "we lost $325,000 in taxes."

Another person with mixed feelings about the sale is Elizabeth Breeden, whose family sold Biscuit Run to Forest Lodge (as detailed in a 7,400-word history of the parcel in this week's C-Ville.) As part of the original planned development, Breeden held on to 36 acres and the right to build 100 homes. She retained that right through the sale of the property to the state.

While plans for a 3,100 unit development died for good with the sale of Biscuit Run to the state, Elizabeth Breeden retained 36 acres and still plans to build 100 houses somewhere on the site. "I'm kind of a donut hole," she says. (Photo represents Hook conjecture only.)PHOTO COURTESY FLICKR/LAUREN KEITH

"I'm kind of a donut hole," says Breeden, explaining that she plans to engage in a land-swap that could push her development to the perimeter.

"As an individual, I am happy," she says of the state park, citing "beloved trees and walks that will now remain that way forever."

But as a taxpaying resident of Albemarle County, says Breeden, she is dismayed.

"The citizens of Charlottesville and Albemarle were not served well by this," she says, noting that the County's growth is now pushed further away from the urban ring.

"Keeping development as close as possible is what Albemarle's comprehensive plan was all about," she says. Biscuit Run's access to public water and sewer as well as its proximity to downtown Charlottesville, she adds, would have made it a sustainable development.

Steve Williams, executive director of the Thomas Jefferson Planning District Commission, says he doesn't object to the park but he does object to how the state handled the purchase, including a failure to consult with the Metropolitan Planning Organization–- a board that makes recommendations on local transportation matters and on which Rooker sits–- as policy demands.

"That was our issue," says Williams. "They didn't go through the process and give us an opportunity to weigh in." Williams notes that because the federal money poured into the Biscuit Run deal is not guaranteed to any particular locality, VDOT has the right to spend it where it chooses. Still, he adds, there's a "crisis going on at the state and federal level relating to transportation funding. It's a constant effort to find funds for transportation improvements."

Former councilor Schilling agrees– and says that VDOT spending millions for a park and then "crying poor" doesn't make sense. "There's something wrong here," Schilling says. "Someone's manipulating the system."

Given that the deal was among the last acts of an outgoing Democratic governor–- and that his Republican successor, Bob McDonnell, has suggested selling off the state's liquor stores and closing six already-existing state parks to ease budget woes, some wonder whether if McDonnell approves of the last-minute deal.

In fact, McDonnell's spokesperson Stacey Johnson says, he does because a state park in Albemarle county was a long-strived for goal of the Virginia Outdoors Plan, the state's master plan for parks. Because of the "high cost of land and difficulty in identifying more than 600 acres in a single tract," Johnson writes in an email, "the state had not been able to achieve this goal."

Calling preservation one of the Governor's "top environmental goals," Johnson adds that McDonnell "feels that the park will be a welcome addition to Albemarle County and will complement other area attractions like UVA, Monticello, Montpelier, Virginia's wineries, among others, for both residents and visitors to the region." However, she offered no time frame on when Biscuit Run might open to the public– and did not obtain comment on whether the Governor felt that any tax credits exchanged in such a deal should be made public.

All this comes amid reports that there was a tract over 600 acres ready and willing. According to multiple reliable sources, the 850-acre Panorama Farms had long been offered to the state as a park. Located on a shore of the Rivanna Reservoir amid a Blue Ridge Mountains backdrop in Earlysville, Panorama might seem a more scenic site than Biscuit Run's suburban setting off Old Lynchburg Road. A working farm already transitioning into recreational events like bike and running courses, Panorama also offers a near turn-key enterprise.

Members of the Murray family, who own Panorama, decline to discuss the deal that could have been. Senator Deeds, however, is not shy about expressing his feelings about the deal that was– and the current ability of the state to purchase public property using tax credits without disclosure.

"Any preservation of land is a good thing," says Deeds, "but the other side is that somebody benefits and taxpayers cover the cost. Every speck of information ought to be open to public scrutiny."

Deeds says he'd consider legislation to prevent similar situations from ever happening again. And if Deeds does, conservative Schilling's feelings on the matter of issuing millions in shrouded tax credits suggests bipartisan support for ending the secrecy.

23 comments

Ken Jamme November 10th, 2010 | 6:30pm

Democracy, You layed it all out perfectly. Democrat or Republican anyone who can't see what will happen with Republican control of congress is just plain uninformed or blinded by party lies.
Republican govt spending is equal to or greater than Democrat spending, they just call it something else.
I watch the house and senate channels on satelite TV from time to time and it is shocking and depressing how all the members follow in lockstep the party line.
All I will say is
We better see some help for the working man/woman in the form of tax reductions and job growth very soon or our cities will burn.

nicknameoscar October 27th, 2010 | 11:33am

Very interesting article, thank you.

It was a long article and I was interrupted several times so my apologies if my next question was covered.

Is there a way to determine if Forest Lodge or its investors donated to the Democratic party or ex-governor Kaine?

Probably not, but I thought I would ask.

dawg October 27th, 2010 | 12:18pm

I'm fine with a park instead of another hideous, half-finished development like Belvedere or Old Trail. I would like to see the city and county work together (ha!) to repurpose real estate, both commercial and residential, that is obsolete or failed (i.e., provide incentives to tear the things down and build over them rather than destroy more undeveloped land). If density within the urban ring could be increased, a greater variety of public transit options would become viable.

billmarshall October 27th, 2010 | 12:20pm

There is a property with nearly a mile of James River frontage next to Hatton ferry in Scottsville that has been for sale for less than 1.5 million for three years. (bluebird hill) There is a 650 acre estate with over 2 miles of river frontage just across the bridge in Howardsville with an asking price of 3.4 million. (Dugannon)Both would be perfect for waterfront parks.

This backroom deal bailed out politcally coneected people. They spent the money and took some risks and now the taxpayers are subsidizing their MISTAKE.

This is so wrong it is not funny. It took 325k off the tax rolls forever. The yearly gate at Bisquit run will NEVER bring in 325k even if they put in an RV camp.

It is kind of ironic that the head of the DNC is involved, Most of the people here blame republicans for this kind of thing.

Austro October 27th, 2010 | 12:42pm

Dave Matthews Band would never do such a thing!!!!!!!!!!

so over it October 27th, 2010 | 1:27pm

you realize that two days ago, c-ville did a better job of covering this story, right? get your own ideas.

Jeff D October 27th, 2010 | 1:30pm

Honesty is anathema in Virginia.

democracy October 27th, 2010 | 2:21pm

Something smells fishy.

Hunter Craig should divulge the tax credits that will accrue to the Biscuit Run developers. It is the right thing to do, since what he reaps is taxpayer-subsidized.

Another interesting point though is that Hunter Craig was appointed to the UVa Board of Visitors by Bob McDonnell.

Ken Jamme October 27th, 2010 | 7:08pm

The seeds of revolution have been sown. Look at the big picture people, the rich are getting richer and the poor are getting poorer.
Local and state Politicians are short sighted and greedy.

On the federal level, the chinese are demanding that the value of all their U.S. treasuries go up. Our federal govt is nothing but a puppet on a string, when the republicrats regain power they will respond to chinese demands by eliminating public welfare programs. When the population has no job, no healthcare, no roof over their heads and no hope......
THEN
The winds of war will blow.

Ol T.J. knew it, no democracy ever suceeded in the long run
"THE TREE OF LIBERTY NEEDS TO BE WATERED BY THE BLOOD OF PATRIOTS AND TYRANTS"

? October 27th, 2010 | 9:05pm

I'd like to buy one of those biscuits in the photo. Where the hell can I get one of those quality items?

Bullet Tooth Tony October 27th, 2010 | 9:16pm

I just got my social security "statement" the other day, it said I should expect a reduction in benefits, because the frickin social security fund has been raped and robbed.

Old Timer October 28th, 2010 | 12:52pm

Bill Marshall,

I agree, it really is incredibly wrong. Then again I never thought that Kaine was really ever that much of a Democrat. Doesn't matter though, he's wearing their colours, and is doing it too.

Ken,

The Chinese are piddling in the wind over the devaluation of the US dollar. They didn't have to lend it to us, and they certainly don't mind doing what suits them, including refusing to let their currency float. That, right there, is a big driver for why obs are going to CHina - which is what they want - and allowing them to continue their unfair trade imbalanmce not only with the US, but Western manufacturers.

You are losing your jobs BECAUSE the dollar is not weakening versus the Yuan/Remfe.

Lisa October 28th, 2010 | 1:36pm

nicknameoscar -

You can look up political donations at VPAP, http://www.vpap.org/donors
Hunter Craig is a big donor - but he is very much a Republican.

Ken Jamme October 28th, 2010 | 3:10pm

Old timer, thank you for that, I sometimes make outlandish claims in my blogs to get information like you've given.
My next question would be:
How are the money markets affected when the chinese raise/lower their interest rates?

nicknameoscar October 28th, 2010 | 3:54pm

Thank you Lisa... very interesting.

democracy October 29th, 2010 | 7:33am

The Chinese have an unemployment problem that dwarfs our own, so they really have no interest in letting the value of their currency to float.

We have a huge trade imbalance with China and they've piled up big currency reserves. Much of that they've loaned to the U.S. government or used to purchase assets here and in Europe, the Middle East and Africa. And they've invested in infrastructure in China and in their military.

This has occurred in no small part because of the economic policies we've pursued in this country for much of the last 30 years (supply-side economics).

Hunter Craig and conservatives like him have supported those policies. And they've profited from them. Handsomely. And they don't really mind if other citizens subsidize their gains. l

No doubt, Craig and other conservatives support Robert Hurt. Hurt proposes more of the supply-side stupidity that was a major cause of our current economic predicament. I't's bad policy for most citizens, but beneficial to the wealthy....

Lisa October 29th, 2010 | 11:07am

Democracy speaks the truth. :)

It is really quite sad how people don't take the time to learn history or the facts about issues that will affect them in such a large way during their lives.

Everyone is affected by "weapons of mass distraction" Lady GAGME, NFL football, alchohol, marahoochie, porn, etc.. It is easy to avoid paying attention to politics.
But not to worry, all of our societal problems will be solved. History tells us these things have a way of working themselves out.

Gorgeous George October 29th, 2010 | 10:08pm

So let me get this straight, the chinese are loaning us money so we can buy more of their crap?

democracy October 30th, 2010 | 6:19am

Yes George....to a very large degree, we are subsidizing Chinese growth, both economic and military. And at the same time, U.S. taxpayers are subsidizing the Hunter Craigs, and even more so, the big bankers and hedge fund managers and corporate elites.

Ken Jamme says that these things have a way of working themselves out. Maybe. While that happens, millions of Americans are dislocated and they suffer while the rich get richer. Poverty increases. The standard of living for most people declines. This has, in fact, been happening.

And if it is confronted confronted and rectified, the political, economic and social health of a nation decline. There are any number of historical examples, but Rome offers an interesting parallel.

As Rome expanded from republic to empire, it acquired more territory. Roman patricians used that territory and slave labor to raise grain. Roman small farmers who served in the military and raised grain themselves, couldn't compete and lost their lands, which were taken by the rich. The unemployed drifted to cities (like Rome), which caused internal pressures (and high welfare costs).
The cost of the military increased (to protect new lands and trade interests. Many of the wealthy paid little or nothing in taxes. They used the public treasury as their own.

Rather than fix the problems Ã¢â?¬â??Ã¢â?¬â?? and there were many who saw the problems and offered solutions Ã¢â?¬â?? the plutocrats made sure that they did not have to sacrifice anything. The two great reformers of that era, Tiberius and Gaius Gracchus offered land reforms (take land from the wealthy and limit the size of large estates and redistribute land to small farmers, thus providing work, easing social tensions and decreasing welfare costs), but both were dispatched with by patrician interests.

Rome was relegated to the dust bins of history.

Read in any newspaper what conservatives propose to "solve" the current economic problems. More tax cuts for corporations and the wealthiest citizens. Roll back health care reform (which was only partial reform). Cut minimum wages. Privatize Social Security and Medicare. Their "solution" is more and more for those who already have the most. Their "solution" is more of what caused the current economic problems.

Regardless of the tax issues, I think the citizens of Charlottesville will be very happy one day that we have this park so close to town. Think about Golden Gate Park in San Franciso, Fairmont Park in Philly, Central Park in NYC - they are all large, beautiful parks that enrich their cities. We didn't have anything of that scale, and money aside, I am pleased to see that this land will be preserved for our future citizenry.

And, it'll help our property values stabilize by getting a whole bunch of potential lots out of the pipeline.

What concerns me more is why the County placed so many proffers on a project within the growth area. If they really want to encourage growth there, they ought to be more careful about penalizing the developer with extraordinary costs. Maybe if they hadn't asked for the sun, moon and stars, the County would have gotten some good tax revenue after development. Now the County gets squat.

RTGreenwood October 31st, 2010 | 7:13am

I have a song title proposal for the DMB for their 11/19/10 JPA performance: Biscuit Run Blues (and how we screwed Virginia taxpayers to add even more millions to our bank accounts while retaining our artistic, hipster integrity and not being called dirty, greedy capitalists (along with our manager)).